Trading platform trueEX has rolled out a new automated trading service for swaps and locked in the participation of two major dealers - something of a coup as banks have traditionally been unwilling to support such efforts in the past.
JPMorgan and Royal Bank of Scotland have committed to making markets on the firm’s new trueFIX service – one they also helped to develop – for standard and bespoke swap transactions.
The service allows dealing desks to price non-standard swap contracts as well as swap packages on an automated basis – a major change for contracts that have traditionally been executed manually and via operationally intensive procedures that both buy and sellside firms have been looking to eliminate.
“The trueEX offering represents a step-change for the industry. By providing clients access to near-instant pricing, execution and processing, trueEX is once again demonstrating the benefits of independent thinking,” said Jennifer Tierney, head of North American rates e-sales at JPM.
“As the market leader, it is natural for JP Morgan to support innovations like this, and participate in initiatives that truly enhance the client experience.”
The service builds on Dodd-Frank and market efforts to move swaps trading into a more exchange-like framework, where contracts execute via transparent prices on-screen.
Development has been slow going as market participants report dealers have pushed back against a move away from old trading methodologies, where banks trade on dealer-only electronic platforms and buyside firms manually execute via requests-for-quote to specific dealer counterparties and at a different price.
A lawsuit was filed two weeks ago in US District Court alleging that JPM and RBS, among others, blocked trueEX and other platforms from providing exchange-like trading of interest rate swaps in recent years.
The suit alleges that bankers colluded to maintain a bifurcated market structure in order to “extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the lawsuit notes.
The JPM/RBS agreement may evidence changing tides in swaps markets, where dealers are constantly under pressure to relinquish control of dealer-specific pricing models.
So far, Dodd-Frank rules have mandated standard swaps to be traded through regulated swap execution facilities and under specific trading protocols. Many other instruments, such as swaps with non-standard maturity dates, continue to trade off-SEF.
The trueFIX service aims to rope in those non-standard swaps for more automated execution methods.
“trueFIX creates more and better trading opportunities for buy-side firms and lowers trade processing costs through the elimination of manual errors,” said Alan Mittleman, head of rates trading for the Americas at RBS. “It’s a game changer for the interest rate swap market that will clearly benefit our clients’ businesses.”
trueEX launched in 2012 as a challenger to incumbent swap-trading platforms operated by inter-dealer brokers such as ICAP and Tradition – and incumbent dealer-to-buyside platforms Tradeweb and Bloomberg.
The platform’s CEO, Sunil Hirani, said that 19 banks have signed up as market-makers with several looking to build into the trueFIX API in the future. Other challenger platforms have struggled to achieve dealer buy-in and in some cases have restructured business models in response.
The firm also has 73 buyside firms signed on to the service and has executed US$1trn notional since launch.